Car Industry Drives Kerkorian Toward Casinos
November 23rd, 2006 by Ian
General Motors shares continue to tumble down to 31.09 from 32.61 yesterday, after pushing 36 last week. Kirk Kerkorian decided to cut his investment and move it toward the gaming industry. Business Week had an article about it. Here are some of the highlights:
On the same day, Nov. 22, that Kerkorian’s company, Tracinda, said it is tendering an offer to buy $825 million in MGM Mirage (MGM) shares, it also said it is selling off a chunk of its GM stock, reducing its stake in the automaker from 9.9% to 7.4%. The move, say analysts, signals that the dissident shareholder will likely not pursue a proxy battle with GM, and will continue to dial down the firm’s investment in the struggling automaker.
News of Kerkorian’s sale sent GM shares plummeting nearly 5%, closing at $31.09 on the New York Stock Exchange, on Nov. 22. GM’s shares had fallen about 10% from Nov. 17 through Nov. 22 as Wall Street analysts expressed doubts about the speed at which GM can achieve sustained profitability and recover market share.
Kerkorian’s move on MGM would increase his holding in the casino/hotel company to almost 62%. In a regulatory filing, Tracinda said it had agreed on Monday to sell 14 million GM common shares in a private transaction for $33 per share.
More bad news for the American auto industry, but few seem to realize that General Motors shares traded below $20 per share in the first quarter of this year. Could it have been the last hurrah to squeeze out the bears before a huge plummet? Maybe. A tradingmarkets.com article gives a little more insight to the reason of the change of heart:
The move was triggered by Kerkorian’s disagreement with the General Motors management over a global partnership with Renault-Nissan, which despite Kerkorian’s support, failed to materialize. As a result, Kerkorian’s representative, Jerry York, who was on the GM board, had resigned. After York left GM’s board, Kerkorian said he would abandon a previous plan to acquire an additional 12 million shares in the automaker.
It appears AutoBlog thinks Kerkorian made a mistake,
Who knows what goes on in the mind of Kirk Kerkorian, but knowing what we know about GM’s product lineup stretching out through 2010, we’d have to say that selling his stake in the company is a move that will probably lose money in the long run. We’re not financial analysts by any means, but GM’s turnaround has just started the back nine and will bear fruit in the form of profits before the end of 2008. Or so says our Magic 8-Ball.
but his recognition of the stubbornness of Detroit after an eight month, 80% rally, really seems like a good move to me.
